DEA serves warrants across metro area as part of criminal investigation

By Erica Meltzer and Mitchell Byars, Camera Staff Writers

Posted:
11/21/2013 10:31:53 AM MST

Updated:
11/22/2013 10:37:47 AM MST

A law enforcement officer walks past a pile of marijuana seized during a raid at 6859 North Foothills Highway north of Boulder on Thursday. Records show three marijuana-related businesses at that address: Swiss Medical Industries, Boulder Sweet Grass and Greenhill Investments.

Federal authorities raided more than a dozen marijuana facilities in the Denver metro area, including grow operations north of Boulder and a dispensary in Nederland, on Thursday morning as part of an ongoing criminal investigation.

A lawyer for one of the raid's targets near Boulder said federal agents seized more than $1 million worth of marijuana plants from a grow operation on North Foothills Highway while carrying out a search warrant.

Department of Justice spokesman Jeff Dorschner didn't provide details about the investigation, but he said he could state "unequivocally" that the actions were consistent with federal guidelines issued earlier this year that marijuana businesses operating in compliance with their states' laws and not tied to other criminal activity would not be targeted for enforcement.

Dorschner said Thursday that authorities believe the targeted businesses may have violated one or more of the federal prosecution priorities. He also confirmed that the multiple search-warrant executions and seizures were part of a single criminal investigation.

Dorschner said no one was arrested Thursday, and he could not say when federal authorities would release more information about the case.

He declined to identify the addresses of the targeted businesses in Boulder or Denver.

Officials from the Drug Enforcement Administration and the Boulder County Sheriff's Office were seen executing warrants at the former Beech Aircraft facility at 6859 North Foothills Highway, where a large pile of snow-covered marijuana plants was visible outside for much of the morning Thursday.

By 1 p.m., the marijuana was loaded into a large truck and removed from the area.

Boulder County Assessor's Office records show three marijuana-related businesses at that address: Swiss Medical Industries, Boulder Sweet Grass and Greenhill Investments. It was not clear whether all three businesses were the target of search warrants or just one or two.

County records indicate all three hold licenses for marijuana grow operations; Greenhill also holds a license for manufacture of infused products.

A search warrant obtained by The Denver Post for the property lists 10 "targets" who are owners of marijuana facilities, including Laszlo Bagi, who owns Swiss Medical Industries.

According to the search warrant, in addition to the plants investigators were searching for weapons and ammunition "which may be used to provide protection to the narcotics trafficking operation, its members and or assets."

The warrant also said investigators were searching for records, receipts, photographs, names and correspondence related to "co-conspirators, sources of supply, customers, financial institutions and other individuals or businesses with whom a financial relationship exist."

James "Skip" Wollrab, an attorney for Bagi, said his client did nothing wrong and that he followed state regulations closely.

Wollrab said because federal agents are required to destroy any marijuana plants they see while serving warrants, the warrants were simply a "vehicle" to destroy his client's plants.

"They took $1 million worth of plants from his facility," Wollrab said. "They didn't leave any instructions, saying don't replant. There was no court order of cease and desist. No explanation."

Wollrab said the agents were also raiding Bagi's grow facilities in Commerce City and the effect will likely bankrupt his client.

The search warrant indicated that areas of the building in North Foothills not associated with Bagi were not subject to search.

A front loader dumps several hundred pounds of marijuana seized during a raid into the back of a large truck on North Foothills Highway near Boulder on Thursday. (Mark Leffingwell/Camera)

According to court records, Bagi was arrested on suspicion of drug use and DUI in 1991 in Boulder and has also been involved in numerous civil suits -- many of them involving marijuana dispensaries -- in several counties in Colorado.

The raids

Boulder County Sheriff Joe Pelle said his department was also asked to provide security while the DEA served a warrant at a dispensary in Nederland. A member of the Boulder County Drug Task Force said the dispensary raided was Grateful Meds.

At the VIP Cannabis dispensary in Denver on Thursday, broken glass from a shattered front window littered the parking lot while masked agents hauled boxes of evidence into a U-Haul truck. Police turned customers away.

"The Drug Enforcement Administration, Internal Revenue Service Criminal Investigations, the Denver Police Department and state and local law enforcement are today executing lawfully obtained search warrants and seizure warrants," Dorschner said.

"Although we cannot at this time discuss the substance of this pending investigation, the operation under way today comports with the Department's recent guidance regarding marijuana enforcement matters," Dorschner said in an e-mailed statement.

The Department of Justice said in August that it wouldn't stand in the way of votes in Colorado and Washington to legalize recreational pot, but warned there needed to be effective controls to keep marijuana away from children, the black market and federal property.

Mason Tvert of the Marijuana Policy Project said he doesn't know what inspired the raids.

"The Justice Department said it would respect states' rights to regulate marijuana, and that it would not go after businesses as long as they are complying with state laws," he said in a statement. "We hope they are sticking to their word and not interfering with any state-regulated, law-abiding businesses. ... If a business is suspected of violating state laws, they will likely face increased scrutiny, and if they are found to be in violation, they will likely face consequences. That is how our society treats alcohol, and that is how we expect to see marijuana treated."

On Aug. 29, the Justice Department issued a memo to federal prosecutors revealing the federal government wouldn't stand in the way of marijuana legalization. The memo warned the federal government would still "aggressively enforce" eight areas of concern surrounding the drug:

preventing distribution to minors;

preventing revenue from marijuana sales from going to criminal enterprises, gangs and cartels;

preventing diversion of marijuana from states where it is legal to other states;

preventing state-authorized marijuana activity from being used as a cover or pretext for the trafficking of other illegal drugs or other illegal activity;

preventing violence and the use of firearms in the cultivation and distribution of marijuana;

preventing drugged driving and the exacerbation of other adverse public health consequences associated with marijuana use;

preventing the growing of marijuana on public lands and the attendant public safety and environmental dangers posed by marijuana production on public lands;

preventing marijuana possession on federal property.

"While the investigation is ongoing, there are strong indications that more than one of the eight federal prosecution priorities identified in the Department of Justice's August guidance memo are potentially implicated," Dorschner said.

Jeff Gard, a Boulder attorney who represents marijuana businesses, said he knew that some kind of enforcement action was coming, at least from the state Medical Marijuana Enforcement Division. When that division was understaffed and underfunded, enforcement against shadow owners, illegal out-of-state owners and illegal sales to the black market lagged, Gard said.

Gard said he does not have specific information about Thursday's raid, but he had heard from state investigators that they planned to move against those who weren't following the law once they had the manpower, and he suspects state authorities are working closely with the feds.

Gard said the involvement of the IRS likely means suspected tax violations are involved as well. Though marijuana remains illegal at the federal level, business owners still have to pay taxes.

Good news?

Shawn Coleman, a Boulder-based consultant to the industry, said that until more information becomes available, people in the marijuana industry should not assume the Justice Department is going back on its word. He noted that federal agents are only raiding certain businesses, not all or most of the states' hundreds of marijuana businesses.

"There isn't a lot of information out yet in the public about why these businesses were targeted," he said. "If it turns out to be the case that these businesses were operating outside those eight bright lines established in the (Justice Department) memo, then this is good news. If this action is consistent with that, then a) people who are problems are being caught, and b) people who are operating legitimate businesses can continue to operate legitimate businesses."

Thursday's actions took place roughly seven weeks before marijuana will begin to be sold legally to adults in retail stores on Jan. 1.

The Boulder City Council decided earlier this month that the city will accept applications from existing, compliant medical marijuana businesses to convert to recreational sales on Jan. 2 and that conversion could be completed in as little as half an hour. However, whether businesses will be able to open to the general public depends on whether they can also get a state license by Jan. 2.

Businesses that want to "co-locate" medical and recreational businesses in the same site will need to go through a more complicated process. New recreational marijuana businesses can apply for city licenses in June.

Colorado is the first state in the country to allow legal retail sales after voters in 2012 approved Amendment 64. Washington state also approved legal sales, but the retail operations won't begin until the spring.

Camera Staff Writer Charlie Brennan, The Denver Post and the Associated Press contributed to this report.

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